Filed by Automated Filing Services Inc. (604) 609-0244 - U.S. Geothermal Inc. - Exhibit 10.5








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 RAFT RIVER  

  GEOTHERMAL LEASE AND AGREEMENT 

                     THIS
  GEOTHERMAL LEASE AND AGREEMENT, (herein sometimes referred to as “Lease”)
  made and entered as of the 14th day of June, 2002 by and between Sergene Jensen,
  Personal Representative of the Estate of Harlan B. Jensen hereinafter referred
  to as “Lessor”, whether one or more, and U.S. GEOTHERMAL Inc., an
  Idaho corporation, hereinafter referred to as “Lessee”; 


WITNESSETH: 


           1.       That
  Lessor, for and in consideration of Ten Dollars ($10.00) in hand paid to Lessor
  by Lessee, the rentals provided for hereinafter, and other good and valuable
  consideration, the receipt and adequacy of which are hereby acknowledged, and
  in consideration of the covenants and agreements hereinafter contained has granted,
  leased, let and demised and by these presents does grant, lease, let and demise
  exclusively to Lessee, its grantees, successors and assigns, upon and subject
  to the terms and conditions hereinafter set forth, all that certain land, geothermal
  and mineral rights for real property located in the County of CASSIA, State
  of IDAHO, more particularly described in Exhibit “A” attached hereto
  and by this reference made a part hereof (hereinafter referred to as the “leased
  rights” ), including all roads, streets, alleys, easements and rights of
  way owned or claimed by Lessor, on, within, or adjoining the lands above described.
  This Lease shall cover all the interest in the leased rights now owned or hereafter
  acquired by Lessor. 

 By the use of such methods as Lessee may desire, Lessee, and
  its designated representatives, shall have the sole and exclusive right to utilize
  the leased rights, including but not limited to the right to explore for, drill
  for, test, develop, operate, produce, extract, take, remove or sell Hot Water,
  Steam and Thermal Energy and Extractable Minerals, and to store, utilize, process,
  convert and otherwise treat such Hot Water, Steam and Thermal Energy, and to
  extract any Extractable Minerals during the term hereof and to transport same,
  and to inject or reinject effluents into the well or any wells drilled pursuant
  to the leased rights; or inject water, gas or other fluid or substances by artificial
  means into formations containing Hot Water, Steam or Thermal Energy. Further,
  Lessee, its designated representatives and anyone purchasing Leased Substances
  (as hereinafter defined) from Lessee are hereby granted the use of any easements
  owned by Lessor across said land, to the full extent of any such rights held
  by Lessor. In the event this Lease should terminate with respect to a portion
  of the rights granted Lessee, it shall nevertheless continue in full force and
  effect to any rights of way and any easements appurtenant thereto that are being
  used from time to time when such termination occurs and shall continue in effect
  so long as such rights of way and easements or any of them continue to be used
  from time to time for the purposes above described or for the production and
  utilization of Geothermal Resources from lands in the vicinity thereof by Lessee,
  its designated representatives, or anyone who has purchased, or is purchasing,
  Leased Substances from Lessee, their successors and assigns. The possession
  by Lessee of the leased rights shall be sole and exclusive for the purposes
  hereof and for purposes incident or related thereto. Lessee agrees to conduct
  its activities in a manner which will not unreasonably interfere with any rights
  reserved to Lessor. 

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           2.       This
  Lease shall be for a term of ten (10) years from and after the date hereof (hereinafter
  referred to as the “Primary Term”) and so long thereafter as Leased
  Substances, or any of them, are derived or produced in commercial quantities
  from the well or through the leased rights, or lands, rights or facilities pooled,
  unitized or combined therewith, and for so long as Lessee is prevented from
  producing same, or the obligations of Lessee hereunder are suspended, for the
  causes hereinafter set forth, or this Lease is continued in force by reason
  of any other provision hereof. 

                     If
  at the expiration of the Primary Term, Lessee is then engaged in operations
  for drilling, reworking, recompleting, redrilling or enhancement of the well,
  or any well developed in exercise of the leased rights, or any well on or lands
  pooled, unitized or combined therewith, this Lease shall remain in force so
  long as any such drilling, reworking, recompleting, redrilling or enhancement
  operations are prosecuted (whether on the same or different wells) with no cessation
  of such operations for more than six (6) months, and if such operations result
  in production or the establishment to the satisfaction of the Lessee of the
  existence of Sufficient Power Potential or Extractable Minerals in Commercial
  quantities, such well or wells will be deemed to have been completed during
  the primary term of this Lease. 

           3.       
  It is understood and agreed that the initial consideration paid upon the execution
  hereof, covers both the rental in full hereunder for a period of one (1) year
  from the date of this Lease and for all other rights conferred hereunder. Thereafter,
  for the first five (5) years of the lease, on or before said anniversary date,
  Lessee shall pay or tender to Lessor an annual rental in the amount of TWO
  AND ONE-HALF DOLLARS ($2.50) per acre, which shall constitute rental until
  the next anniversary date hereof. For the second five (5) year period of the
  lease, Lessee shall, on or before each succeeding anniversary date during the
  Primary Term hereunder, pay or tender to Lessor an annual rental in the amount
  of THREE AND NO/100 DOLLARS ($3.00) per acre, until such time as from
  the drilling of a well or wells on the leased land, or lands pooled, unitized
  or combined therewith, there has been established to the satisfaction of the
  Lessee the existence of Sufficient Power Potential or Extractable Minerals in
  Commercial quantities. Upon such establishing as aforesaid, Lessee may nevertheless
  continue to pay or tender annual rental payments on or before each anniversary
  date, until Lessee has commenced the actual sale of one or more Leased Substances,
  and so long as such annual rental payments to be paid or tendered, whether beyond
  the Primary Term or not, this lease shall remain in force and effect. All payments
  so paid or tendered after the expiration of said Primary Term shall be deemed
  advance royalties. Lessee shall have the right to reimburse itself for any such
  payments of one-half (1/2) of any royalties which shall thereafter become payable
  hereunder. So long as such payments are paid or tendered each well or wells
  shall be deemed to be actually producing one or more Leased Substances in Commercial
  Quantities under the terms hereof; provided, however, that if within five (5)
  years after the date of expiration of the Primary Term hereof Lessee shall have
  failed to make, or make arrangements for (by executed contract or contracts)
  a bona fide Commercial sale of one or more Leased Substances (or electric energy
  generated therefrom) then Lessor, at its option, may consider Lessee in default
  hereunder. Additionally, should Lessee fail to make any annual payment herein
  provided for on or before a particular anniversary date, Lessor may, at its
  option, consider Lessee in default hereunder. 

           4.       Lessee
  shall conduct all work in compliance with the applicable laws and regulations
  of the state of Idaho and the United States of America. Lessee shall be fully
  responsible for compliance with all applicable Federal, state, and local statutes,
  regulations, and ordinances relating to such work, and for reclamation bonding
  and any bonding required for geothermal wells. Lessor agrees to cooperate with
  Lessee in Lessee’s application for governmental licenses, permits, and
  approvals, all costs of which shall be borne by Lessee. 

                     Lessee
  shall, upon written request of Lessor or the owner of the land upon which the
  well is located or with which the leased rights are associated, fence all excavations
  (including sumps and settling ponds), and, upon the termination of the Lease,
  Lessee shall level and fill all sump holes and excavations, shall remove all
  debris and shall leave the locations or premises used by Lessee in a clean and
  sanitary condition. 

                     Lessee
  shall replace all fences which the Lessee may have removed for its purposes
  and repair all fences which Lessee may have damaged, and if and when so required
  by the Lessor, will provide a proper livestock guard at any point of entry upon
  lands used by Lessee. 

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                    Lessee
  shall protect Lessor’s interest in the leased rights against liens of every
  character arising from its operations thereon. Lessee, at its own expense, prior
  to commencing operations pursuant to the leased rights, shall obtain, and thereafter
  while this Lease is in effect shall maintain, adequate Workers Compensation
  Insurance. Lessee shall protect Lessor against damages of every kind and character
  arising out of the operations or working of Lessee or those under Lessee’s
  control pursuant to the leased rights, but Lessee shall not be liable hereunder
  in the event of the negligence or willful misconduct of parties other than Lessee.

          
  5.       Royalties shall be payable as follows:

          
  (a)          With respect
  to Hot Water, Steam or Thermal Energy (collectively to be referred to as “Energy
  Produced”) produced, saved and sold by Lessee and then used by the purchaser
  for the generation of electric power, Lessee shall pay to Lessor as royalty
  Ten Percent (10%) of the market value of such Hot Water, Steam or Thermal Energy
  produced from the well or in exercise of the leased rights at and as of the
  point of origin on the land associated with the well or the leased rights, which
  market value shall be deemed to be the gross proceeds received by Lessee from
  such sale at the point of origin, unless the sale occurs at a location other
  than the point of origin, in which case the market value shall be deemed to
  be the gross proceeds received by lessee from such sale less all costs and expenses
  of processing and transportation between the point of origin and the point of
  sale.

          
  (b)          With respect
  to Hot Water, Steam or Thermal Energy produced, saved and used for the generation
  of electric power which is then sold by Lessee, Lessee shall pay to Lessor as
  royalty Ten Percent (10%) of the Net Proceeds in accordance with the definition
  of Net Proceeds in paragraph 19, subparagraph (h).

          
  (c)          With respect
  to Energy Produced, saved and sold by Lessee and which is used for any purpose
  other than the generation of electric power, Lessee shall pay to Lessor as royalty
  Five Percent (5%) of the gross proceeds received by Lessee from the sale of
  Energy Produced, as such, produced from the well or in exercise of the leased
  rights at and as of the point of origin on the land associated with the well
  or the leased rights.

          
  (d)          With respect
  to Extractable Minerals, Lessee shall pay as royalty to Lessor Five Percent
  (5%) of the net proceeds received by Lessee from the sale of any gases (as herein
  defined) and from the sale of effluents (containing minerals and/or minerals
  in solution) produced and sold from the well or in exercise of the leased rights,
  or, in the event Lessee extracts from the effluents minerals and/or minerals
  in solution, Five Percent (5%) of the proceeds received by Lessee from the sale
  of minerals and/or minerals in solution contained in and extracted from such
  effluents less costs of transportation and extraction. If Lessee consumes Leased
  Substances or electric power generated therefrom, by either use or exchange,
  for purposes other than its operations with respect to the well or the leased
  rights, then such Leased Substances or electric power generated therefrom shall
  be deemed sold for royalty purposes and the above-described royalty shall be
  paid on the same value basis as if such Leased substances or electric power
  generated therefrom had been sold by Lessee at the time of production under
  Lessee’s then existing sales contract.

          Lessee
  shall pay to Lessor on or before the twenty-fifth day of each month the royalties
  accrued and payable for the preceding calendar month, or on or before the twenty-fifth
  day of the month next following that in which Lessee receives payment therefor
  from the purchaser thereof, whichever method may be chosen by Lessee from time
  to time, and in making such royalty payments Lessee shall deliver to Lessor
  statements setting forth the basis for computation and determination of such
  royalty.

          Lessee
  shall not be required to account to Lessor for or to pay any royalty on Hot
  Water, Steam, Thermal Energy or Extractable Minerals produced by Lessee which
  is not utilized, saved and sold, or which is used by Lessee in its operations
  with respect to the well or the leased rights for or in connection with the
  developing, recovering, producing, extracting and/or processing of Hot Water,
  Steam, Thermal Energy and/or minerals in solution or in facilities for the generation
  of electric power, or which are unavoidably lost.

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          Lessee
  shall have the right from time to time and at any time to commingle (for purposes
  of storing, transporting, utilizing, selling and processing, or any of them)
  the Leased Substances, or any of them, that are produced or extracted from the
  well or in exercise of the leased rights or lands pooled, unitized or combined
  therewith, with Geothermal Resources, or any of them, produced from other lands
  or units in the vicinity of the well or the land associated with the leased
  rights, and in the event of such commingling, Lessee shall meter, gauge, or
  measure the production from the well or in exercise of the leased rights, or
  from the unit or units, including leased and other units or lands, as the case
  may be, and compute and pay Lessor’s royalty payable under the provisions
  hereof on the basis of such production so determined or allocated, as the case
  may be.

           6.       Lessee
  shall have the right to drill such well or wells as Lessee may deem desirable
  for the exercise of the leased rights, including wells for injection or reinjection
  purposes, and shall have the further right to dispose in any such wells waste
  brine, water and other substances, waste products from a well or wells, power
  plants or other facilities. Lessee shall further have the right for testing
  purposes, to freely transfer Leased Substances and Geothermal Resources and
  to inject such leased Substances and Geothermal Resources into well or into
  any wells developed pursuant to the leased rights. 

           7.       Lessee
  may, at any time or from time to time, as a recurring right for drilling, development,
  production or operating purposes, pool, unitize or combine all or any part of
  the leased rights into a unit with any other land or lands or lease or leases
  (whether held by Lessee or others) adjacent, adjoining or in the immediate vicinity
  of the land on which the well is located or with which the leased rights are
  associated, which Lessee desires to develop or operate as a unit, provided that
  the total acreage to be embraced within any such drilling, development, production,
  or operating unit shall no exceed one thousand nine hundred twenty (1,920) acres,
  plus an acreage tolerance of Ten Percent (10%), except that a larger unit may
  be created to conform to State or Federal regulations. Such unit shall be deemed
  created either upon Lessee recording in the office of the county recorder a
  written declaration of such unit or upon Lessee giving written notice of such
  unit to Lessor. Any well (whether or not Lessee’s well) commenced, drilled,
  drilling and/or producing or being capable of producing in any part of such
  unit shall for all purposes of this Lease be deemed a well commenced, drilled,
  drilling and/or producing in exercise of the leased rights, and Lessee shall
  have the same rights and obligations with respect thereto and to drilling and
  producing operations upon the lands from time to time included within any such
  unit as provided under this Lease provided, however, that notwithstanding this
  or any other provision or provisions of this Lease to the contrary:

          (a)          Production
  as to which royalty is payable from any such well or wells drilled upon any
  such unit, whether located upon the leased rights or other lands, shall be allocated
  to the well and leased rights in the proportion that the acres of geothermal
  rights associated with the leased rights bears to the total geothermal acreage
  of such unit, and such allocated portion thereof shall for all purposes of this
  Lease be considered as having been produced pursuant to the leased rights and
  the royalty payable under this Lease shall be payable only upon that proportion
  of such production so allocated thereto, and 

          (b)          If
  any taxes of any kind are levied or assessed (other than taxes on the land and
  on Lessor’s improvements), any portion of which is chargeable to Lessor
  under Paragraph 14 hereof, then the share of such taxes to be borne by Lessor
  as provided in the Lease, shall be in proportion to the share of the production
  from such unit allocated to the well and leased rights. 

          Allocation
  of unit production whether to the well and the leased rights or to other lands
  in the unit, shall continue after any termination of all or any part of this
  or any other lease covering lands in the unit until any exploration, drilling,
  remedial drilling or production operations are begun on the lands so terminated,
  or until contracts regarding any such operations are entered into, whereupon
  all such terminated lands shall be excluded in the production to be allocated
  to the respective lands in such unit. In the event of the failure of Lessor’s,
  or any other owner’s, title as to any portion of the rights or land included
  in any such unit, such portion of such land or associated land shall likewise
  be excluded in allocating production from such unit, provided, however, Lessee
  shall not be held to account for any production allocated to any lands excluded
  from any such operating unit unless and until Lessee has actual knowledge of
  the circumstances requiring such 

 4 






exclusion. Any exclusion shall be deemed
  effective the first day of the month next following the date upon which such
  exclusion becomes finally established. 

          Lessee
  may, at its sole option, at any time when there is no Commercial production
  in such unit, terminate, enlarge or diminish such unit either by Lessee recording
  in the office of the county recorder a written declaration thereof, or by Lessee
  giving written notice thereof to Lessor. 

           8.       Lessor,
  or its agents, at Lessor’s sole cost and risk, may during normal hours
  of operation examine the any working, installations, structures, or operations
  of Lessee constructed or undertaken pursuant to the leased rights, and may at
  reasonable times inspect the books and records of Lessee with respect to matters
  pertaining to the payment of royalties to Lessor. 

           9.       Upon
  the violation of any of the terms and conditions of this Lease by Lessee (including
  but not limited to payment of rental, advance royalty and/or royalty) and the
  failure of Lessee, as to monetary matters, to make payment, and as to other
  violations, to begin in good faith to remedy the same, within sixty (60) days
  after written notice from Lessor so to do, specifying in said notice the nature
  of such default, then at the option of Lessor this Lease shall forthwith cease
  and terminate and all rights of Lessee in and to the well and the leased rights
  shall be at an end, except for each and any well then being drilled, or capable
  of producing, or capable of being used for injection purposes, and in respect
  to which Lessee shall not be in default, together with the rights, rights of
  way and easements which may be retained by Lessee by virtue of the granting
  clause of this Lease. 

           10.      Notwithstanding
  any other provisions of this Lease, and in consideration of the payment made
  by the Lessee to the Lessor for the execution of this Lease, Lessee shall have
  the right at any time prior to or after default hereunder, to quitclaim and
  surrender to Lessor all right, title and interest of Lessee in and to the well
  and the leased rights, and thereupon all rights and obligations of the parties
  hereto one to the other shall cease and terminate, save and except as to any
  then accrued royalty obligations of Lessee then payable as to which Lessee shall
  remain liable to Lessor, and save and except the rights, rights of way and easements
  which may be retained by Lessee by virtue of the granting clause of this Lease.


           11.      Notwithstanding
  any other provisions of this Lease, and in consideration of the payment made
  by the Lessee to the Lessor for the execution of this Lease, Lessee shall have
  the right at any time prior to or after default hereunder, to quitclaim and
  surrender to Lessor all right, title and interest of Lessee in and to the leased
  rights, or any part thereof, and thereupon all rights and obligations of the
  parties hereto one to the other shall cease and terminate as to the lands or
  areas so quitclaimed and surrendered, save and except as to any then accrued
  royalty obligations of Lessee then payable as to which Lessee shall remain liable
  to Lessor, and save and except the rights, rights of way and easements which
  may be retained by Lessee by virtue of the granting clause of this Lease and
  paragraph 8, provided that in the event of a partial quitclaim and surrender,
  any future rentals will be reduced proportionately by the number of acres so
  quitclaimed and surrendered. 

           12.      In
  the event Lessor at the time of making this Lease owns an interest in the leased
  land less than One Hundred Percent (100%) of the right, title and interest purportedly
  granted or leased hereby to Lessee, then any payments due Lessor hereunder shall
  be paid to Lessor only in the proportion which Lessor’s Interest bears
  to a One Hundred Percent (100%) interest in the leased land. Notwithstanding
  the foregoing, should Lessor hereafter acquire any additional right, title or
  interest in or to the leased land, it shall be subject to the provisions hereof
  to the same extent as if owned by Lessor at the date hereof, and any increase
  in payments of money hereunder necessitated thereby shall commence with the
  payment next following receipt by Lessee of satisfactory evidence of Lessor’s
  acquisition of such additional interest. In the event Lessor has no interest
  in the Leased Substances produced hereunder, but has an interest in said land,
  Lessee shall pay Lessor an overriding royalty of One Percent (1%) of the Net
  Proceeds received by Lessee from the sale of Leased Substances produced from
  the leased land, as rental for the surface thereof. 

           13.      Lessor
  hereby warrants and agrees to defend title to the leased rights and agrees that
  Lessee, at its option, may pay and discharge any taxes, mortgages, trust deeds
  or other liens or encumbrances existing, levied or assessed on or against the
  well or the leased rights, and in the event Lessee exercises such option, Lessee
  shall be 

 5








 subrogated to the rights of any holder thereof, and shall
  have, among other rights, the right of applying to the discharge of any such
  mortgage, tax or other lien or encumbrance any payments accruing to Lessor hereunder.


           14.      
  Lessee shall pay all taxes levied on structures and improvements constructed
  by Lessee pursuant to this Lease. In the event any taxes are levied or assessed
  against the right to produce Leased Substances, or against any Leased Substances
  on or in the land associated with the well or the leased rights, or in the event
  any increase in the taxes levied or assessed against the well or the leased
  rights shall be based upon the production of Leased Substances from, or reserves
  of Leased Substances attributed to, the well or the lease rights, then in either
  such event Lessee shall pay Ninety Percent (90%) of any such taxes or increase,
  as the case may be, and Lessor shall pay Ten (10%) thereof. Lessor shall pay
  all taxes levied and assessed against all structures and improvements owned
  by Lessor or placed by or pursuant to permission of Lessor. 

           15.      The
  rights of either party hereunder may be assigned in whole or in part, and the
  right and privilege to do so is hereby reserved by each party, and the provisions
  hereof shall extend to the heirs, personal representatives, successors and assigns
  of the parties hereto, but no change or division in ownership of the well, rights,
  rentals or royalties, however accomplished, shall operate to enlarge the obligations
  or diminish the rights of Lessee, and no such change in ownership shall be binding
  upon Lessee until the expiration of thirty (30) days after Lessee is furnished
  with written notice of such transfer or assignment, together with a certified
  copy of the instruments of transfer or assignment. In the event of assignment
  of this lease as to a segregated portion of the leased right, the rentals payable
  hereunder shall be apportionable between the several leasehold owners ratably
  according to the surface area of each, and default in rental payment by one
  shall not affect the rights of other leasehold owners hereunder. Lessee’s
  right of assignment expressly includes the right to sublease all or any portion
  of its rights and obligations hereunder. Lessee must notify the Lessor, in writing,
  within 30 days of any assignment. 

           16.      The
  obligation of the Lessee hereunder shall be suspended and the terms of this
  Lease shall be extended as the case may be, while Lessee is prevented from complying
  therewith, in whole or in part, by strikes, lockouts, riots, war or the results
  thereof, acts of God or the elements, fire, flood, accidents, delays in transportation,
  inability to secure labor or material in the open market, laws, orders, rules,
  or regulations of Federal, State, County, Municipal, or other governmental agencies,
  authority, or representative, or any other matter or condition beyond reasonable
  control of Lessee, whether or not similar to the conditions or matters herein
  specifically enumerated, or while litigation contesting Lessor’s title
  to the well or the leased rights or the rights granted Lessee hereunder or litigation
  involving Lessee’s operations hereunder shall be pending and undetermined
  or during any period when Lessee has no market for the products it is then capable
  of producing from the leased rights or the market price then available for such
  products will not produce an acceptable profit. For so long as any of the above
  circumstances continue to exist, Lessee, without impairment of its rights hereunder,
  shall be excused from performance of al obligations hereunder except payment
  of taxes and protection of the leased rights. It is expressly agreed that the
  prevention of settlement of any litigation or strike or labor disturbance shall
  not be considered a matter subject to Lessee’s control within the meaning
  of this Paragraph. 

                     If
  the permission of approval of any governmental agency is necessary before drilling
  or producing operations may be commenced pursuant to the leased rights, then
  if such permission or approval has been applied for at least thirty (30) days
  prior to the date upon which such operations much be commenced under the terms
  hereof, the obligation to commence such operations shall be suspended until
  ninety (90) days after the governmental permit is granted or approval given,
  of if such permit or approval is denied initially, then so long as Lessee in
  good faith appeals from such denial or conducts further proceedings in an attempt
  to secure such permit or approval and ninety (90) days thereafter. Lessor agrees
  to fully support and cooperate with Lessee in securing permits and authorizations
  to conduct geothermal operations on the leased rights, all costs of which shall
  be borne by Lessee. 

           17.      All
  statements of production and royalty and all payments to be made by Lessee to
  Lessor hereunder shall be sent to the person hereinafter set forth, at the address
  indicated: 

                     Lessee
  shall, upon written notification of change of ownership in the well or leased
  rights or in the rentals or royalties hereunder, as provided in Paragraph 12
  hereof, divide and distribute the same to the new owners of 

 6







such interest; provided, however, that if at any time there
  are three or more persons entitled to rentals or royalties hereunder, Lessee
  may, at its option, withhold payment of such rentals or royalties until a majority
  in interest of such persons designate in writing in a recordable instrument
  delivered to Lessee, a bank, trust company or corporation, as a common agent
  and depositary, to receive all payments due hereunder to such persons. Such
  designation may be changed at any time in the same manner. Delivery of all statements
  and payments hereunder may be made by depositing same in the United States mail
  duly addressed to Lessor at the above address or addresses or to such agent
  and depositary, which shall constitute full performance of Lessee’s obligation
  to make such delivery. In the event that the amount payable under this Lease
  shall result in a payment of less than Twenty-Five dollars ($25.00) becoming
  due Lessor, Lessee may, at is option, withhold and accrue sufficient periodic
  payments until the total due Lessor exceeds Twenty-Five Dollars ($25.00).

          
  18.      Any notice herein required or permitted
  to be given or furnished by one party to the other shall be in writing. Delivery
  of such written notice to Lessor shall be made by deposition the same in the
  United States mail duly certified and addressed to Lessor at 7 River Run Drive,
  Burley , Idaho 83318 and delivery of such written notice to Lessee shall be
  made by depositing the same in the United States mail duly certified or delivered
  by express delivery and addressed to Lessee at 3392 Maze Avenue, Boise, Idaho
  83706. Either party hereto may by written notice to the other party change its
  address to any other location.          

          
  19.      For the purposes of this Lease the following
  definitions shall apply:

          
  (a)          The terms “Hot
  Water”, “Steam” and “Thermal Energy”, collectively
  referred to as “Energy Produced”, each shall mean natural geothermal
  water and/or steam, and shall also mean the natural heat of the earth and the
  energy present in, resulting from or created by, or which may be extracted from,
  the natural heat of the earth or the heat present below the surface of the earth,
  in whatever form such heat or energy naturally occurs;

          
  (b)          The term “Extractable
  Minerals” shall mean any minerals in solution in the well effluents and
  all minerals and gases produced from or by means of the well or any well or
  wells developed in exercise of the leased rights or by means of condensing steam
  or processing water produced from the effluents from any such well or wells.
  Said terms shall also include any water so produced or obtained from condensation
  or steam; provided, however, that the term “gases” shall not include
  hydrocarbon gases that can be produced separately from the well effluents;

          
  (c)          The term “Leased
  Substances” shall collectively man the matter, substances and resources
  defined in subparagraphs 16(a) and 16(b) that are subject to this Lease;

          
  (d)          The term “Geothermal
  Resources” shall collectively mean the matter, substances and resources
  defined in subparagraph 16(a) and 16(b) that are not subject to this Lease but
  are located on adjacent land or lands in reasonable proximity thereto;

          
  (e)          The term “Power
  Potential” shall mean, when used herein with respect to any well or wells,
  the quantity, or units, of energy capable of being recovered from the Hot Water,
  Steam or Thermal Energy produced therefrom by means of any energy conversion
  or utilization facility (including, but not limited to, electrical generating
  facilities) or equipment designed for use thereof;

          
  (f)          The term “Sufficient
  Power Potential” shall mean that Power Potential which, in the sole judgment
  of Lessee shall be sufficient for the Commercial sale or utilization thereof,
  or shall warrant the construction of facilities for the Commercial sale or other
  utilization thereof, or shall justify additional drilling or other operations
  in exercise of the leased rights;

 7 





          (g)          The
  term “Commercial” shall mean those qualities of Leased Substances
  produced, sold or used, the value of which, after determining Lessee’s
  direct operating costs (or extraction costs in the case of Extractable Minerals)
  will be capable of providing a sufficient return to cause Lessee, in its sole
  judgment, to continue production thereof or to elect to proceed with further
  development or exploratory operations in exercise of the leased rights. 

          (h)          The
  term “Net Proceeds” is defined as proceeds from the sale of generated
  electric power to a third party, independent of the Lessor or Lessee, less deductions
  of the sum of direct operating costs, property taxes, franchise taxes, marketing
  expenses and the depreciation of production wells, pipelines, production facilities,
  power generation and power lines through to the sales delivery point. Depreciation
  shall be on a fifteen (15) year straight-line basis with asset capitalization
  in accordance with generally accepted accounting principles. Electric power
  is computed and paid for on the basis of kilowatt- hours (“Kwh”) and
  the royalty shall be calculated on a basis of cents per Kwh. 

           20.      In
  the event any part or portion or provision of this instrument shall be found
  or declared to be null, void or unenforceable for any reason whatsoever by any
  Court of competent jurisdiction, then and in such event only such part, portion
  or provision shall be affected thereby, and such finding, ruling or decision
  shall not in any way affect the remainder of this instrument or any of the other
  terms or conditions hereof, which said remaining terms and conditions shall
  remain binding, valid and subsisting and in full force and effect between the
  parties hereto, it being specifically understood and agreed that the provisions
  hereof are severable for the purposes of the provisions of this clause. In this
  connection, this Lease shall not in any event extend beyond such term as may
  be legally permissible under present applicable laws, and should be any such
  applicable law limit the term hereof to less than that herein provided, then
  this Lease shall not be void but shall be deemed to be in existence for such
  term and no longer. 

           21.      If
  more than one person is named as Lessor herein and one or more of them fails
  to execute this Lease, said Lease shall nevertheless (when accepted by Lessee)
  become effective as a lease from such of said named parties Lessor as may have
  executed the same. 

           22.      This
  Lease may be executed in any number of counterparts and all such counterparts
  shall be deemed to constitute a single lease and the execution of one counterpart
  by any party Lessor shall have the same force and effect as if such party had
  signed all the other counterparts. 

           23.      This
  Geothermal Lease and Agreement and all of the terms, covenants and conditions
  hereof shall extend to the benefit of and be binding upon the respective heirs,
  personal representatives, successors and assigns of the parties hereto. 

                     IN
  WITNESS WHEREOF, the parties have caused this instrument to be duly executed
  as of the date hereinabove first written. 

	Social Security Number	 	Sergene Jensen,
      Personal Representative	Lessor
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	By: 	Douglas J. Glaspey, CEO & Director	 
	 	 	 	 	Lessee



8 






 

	State of Idaho 	)	On this _____ day of June 2002, before me,
	      	 )	 
	 County of ________________________________________	)	 
	 	 	the undersigned Notary Public, personally appeared
		 	 
	 	 	( )  personally
      known to me
	 	 	( )  proved to me on the basis of satisfactory
      evidence to be the person(s) whole name(s) ______________________________
      subscribed to the within instrument, and acknowledged that ___________________________________________
      executed it. 
	 
	 
	 	 	WITNESS my hand and official seal. 
	 	 	 
		 	 
	 	 	Notary’s
      Signature
		 	 
		 	 
		 	 
	State of Idaho	 )	On this _____ day of June 2002, before me,
	     	 )	 
	 County of ________________________________________	) 	 
	 	 	the undersigned Notary Public, personally appeared
		 	 
	 	 	( )   personally
      known to me
	 	 	( )  proved to me on the basis of satisfactory
      evidence to be the person(s) whole name(s) ______________________________
      subscribed to the within instrument, and acknowledged that ___________________________________________
      executed it. 
	 
	 
	 	 	WITNESS my hand and official seal. 
	 	 	 
		 	 
	 	 	Notary’s
      Signature



9 









 EXHIBIT A 


Parcel No. 1 – 961.16 acres more or less: 


 Township 15 South, Range 26 East, Boise Meridian 

	Section 24: 	S1⁄2 NW1⁄4, NE1⁄4NE1⁄4, S1⁄2NE1⁄4,
        SE1⁄4, NE1⁄4SW1⁄4, LESS a 3 rod right-of-way over the West
        side of the SW1⁄4SE1⁄4 for ingress and egress and ditch purposes.
        Tax No. 2194 being the North 3 rods of the SE 1⁄4SW1⁄4 . 

	Section 25: 	N1⁄2NE1⁄4 



Township 15 South, Range 27 East, Boise Meridian 

	Section 18: 	All of Lot 4 (SW1⁄4SW1⁄4) EXCEPT the North 2 rods 
	Section 19: 	Part of the SW1⁄4NE1⁄4 described as follows:
        Beginning at the SW corner of said SW1⁄4NE 1⁄4 ; thence East
        440 feet along the South boundary line of said SW1⁄4NE1⁄4 to
        the True Point of Beginning; thence continuing East 880 feet to the SE
        corner of said SW1⁄4NE1⁄4; thence North 1320 feet along the
        East boundary line of said SW1⁄4NE1⁄4 to the NE corner of said
        SW1⁄4NE1⁄4; thence West along the North boundary line of said
        SW1⁄4NE1⁄4 880 feet to a point; thence South 1320 feet to the
        True Point of Beginning. 

	 	 
	 	SE1⁄4, SE1⁄4NE1⁄4, Lots 1, 2, and
        3 LESS a 3 rod right-of-way along the East side of Lots 2 and 3. 

	 	 
	 	ALSO LESS part of the W1⁄2SE1⁄4 described
        as follows: Beginning at the SW corner of the W1⁄2SE1⁄4 of said
        Section 19; thence East 440 feet along the South line of said W1⁄2SE1⁄4
        to a point; thence North 2640 feet to the North line of said W1⁄2SE1⁄4;
        thence West 440 feet along the North line of said W1⁄2SE1⁄4
        to the NW corner of said W1⁄2SE1⁄4; thence south 2640 feet along
        the West boundary line of said W1⁄2SE1⁄4 to the Point of Beginning.
      

	Section 29:	W1⁄2NW1⁄4 
	Section 30: 	 NE1⁄4NE1⁄4 



Parcel No. 2 – 167.92 acres more or less  

 Township 15 South, Range 27 East, Boise Meridian 

	Section 17: 	SW1⁄4SW1⁄4 
	Section 18: 	SE1⁄4SE1⁄4 
	Section 19: 	NE1⁄4NE1⁄4 
	Section 20: 	Beginning at a point 1200 feet West of the Southeast
        corner of the NE1⁄4NW1⁄4 ; thence West 1440 feet; thence South
        2220 feet; thence East 440 feet to the West boundary line of Clear Creek;
        thence in a Northeasterly direction along the West boundary line of Clear
        Creek, approximately 2409 beet to the Point of Beginning. 



 10  









Parcel No. 3 – 472.08 acres more or less 


 Township 15 South, Range 27 East, Boise Meridian 

	Section 20: 	W1⁄2SE1⁄4, S1⁄2NW1⁄4, and the
        SW1⁄4 EXCEPTING that part of the S1⁄2NW1⁄4 lying North
        and West of Clear Creek AND ALSO EXCEPTING all that part of the North
        900 feet of the NW1⁄4SW1⁄4 lying North and West of the Channel
        of Clear Creek. 

	 	NW1⁄4NW1⁄4 
	Section 29:	W1⁄2NE1⁄4 and E1⁄2NW1⁄4 


Parcel No. 4 – 1,353.59 acres more or less  

 Township 15 South, Range 26 East, Boise Meridian 

	Section 25: 	N1⁄2NW1⁄4 

	Section 26: 	E1⁄2SW1⁄4, N1⁄2, W1⁄2SW1⁄4
        and W1⁄2SE1⁄4, EXCEPT a right-of-way for ingress and egress
        from a point approximately 30 rods South of the Northeast corner of the
        NW1⁄4NE1⁄4 of Section 26, to the present roadway intersection
        the North line of said Quarter approximately 6 rods West of the Northeast
        corner of said Quarter, for the use and benefit of the premises immediately
        adjoining on the East of said Quarter. 

	 	 
	 	And EXCEPTING from the above the following: Beginning
        at the Northeast corner of the NW1⁄4 of Section 25, running thence
        West 240 rods; thence South 3 rods; thence East 240 rods; thence North
        3 rods to the Point of Beginning. 

	 	 
	 	SUBJECT to the right-of-way for irrigation ditch
        as not constructed along the North line of said property, with the right
        of ingress and egress along the South bank of said ditch. 

	 	 
	Section 27: 	SE1⁄4, SE1⁄4NE1⁄4 EXCEPTING AND RESERVING
        85% of all oil, gas and mineral rights unto Richard H. Smith, a widower.
      

	 	S1⁄2SW1⁄4, NE1⁄4SW1⁄4, N1⁄2NE1⁄4,
        SW1⁄4 NE1⁄4

	Section 28: 	SE1⁄4SE1⁄4 

	Section 33: 	NE 1⁄4 NE 1⁄4 

	Section 34: 	NW1⁄4NW1⁄4 EXCEPTING AND RESERVING an undivided
        one-half interest in all oil, gas and mineral rights in Boyd H. Stewart,
        Sybil S. Stewart, Lynn Stewart, Mabel R. Stewart and Laura C. Stewart.
      



Township 15 South, Range 27 East, Boise Meridian 

	Section 18: 	NE1⁄4 EXCEPTING the following described parcel
        of land, to-wit: Beginning at the Northeast corner of said Section, thence
        West 18 rods, thence South 18 rods, thence East 18 rods, thence North
        to the Place of Beginning. 



11